"every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States ... shall be deemed guilty of a felony."
What it is: The Sherman Antitrust Act, passed in 1890, was the first piece of federal legislation to prohibit trusts. It was named after Sen. John Sherman of Ohio. The act was passed by the senate with a vote of 51-1 and the House unanimously with a vote of 242-0. It was signed into law by President Harrison on July 2. The act was in response to growing public concern regarding the power of monopolies, which had the ability to fix prices and essentially control the market without any government intervention.
What it does: The Sherman Antitrust Act can be summarized in two points:
It outlaws anything that restrains trade between states and/or foreign nations (this includes fixing prices, limiting industrial outputs, market allocations, etc.)
It outlaws monopolies of trade or commerce
Any person/company found in violation of the act is subject to fines and/or imprisonment, as well as the dissolution of the company (if applicable).
E.C. Knight Case (1895): E.C. Knight Sugar Refining Company was prosecuted in Supreme Court under the Sherman Antitrust Act in 1895. E.C. Knight had just bought four other sugar refining companies so that it controlled 98% of the sugar refining industry. The court, under Chief Justice Melville Fuller, found E.C. Knight not guilty. Its reasoning was that the Sherman Antitrust Act specifically referenced monopolies of "trade or commerce among the several States"; E.C. Knight had a monopoly over manufacturing, not commerce, and therefore the monopoly was legal under the Sherman Antitrust Act. This finding essentially rendered the act toothless, as it could no longer be used to dissolve any monopolies that did not relate directly to commerce.
The E.C. Knight Sugar refining Company gained control of the American Sugar Refining Company to establish a monopoly on the sugar refining industry; by 1982, the company controlled 98% of the industry.
Use as a Strike-Breaking Tool (Pullman Strike, 1984): During the Pullman Labour-Union Strike, federal injunctions were issued against the leaders of the American Railway Union, stating that the strike interfered with interstate commerce and was therefore illegal under the Sherman Antitrust Act.This established the Sherman Antitrust Act as a strike-breaking tool.
Effects: Because of the findings of the E.C. Knight case, combined with the substantial impact of monopolies on the government, the Sherman Antitrust Act was largely ineffectual in the 19th century. However, due to President Roosevelt's extraordinary efforts to break trusts, the law met more success beginning with his presidency. In 1904 Roosevelt invoked the law to successfully prosecute and dissolve the Northern Securities Company. Other significant victories came under President Taft in 1911 when he dissolved Rockefeller's Standard Oil and the American Tobacco Company. In 1914 President Wilson passed the Clayton Antitrust Act, which essentially replaced the Sherman Act as a stronger, more effectual piece of antitrust legislation. Although other pieces of antitrust legislation have largely replaced the Sherman Act, the importance of the Sherman Act cannot be overlooked, as it paved the way for other antitrust legislation and introduced the idea of government regulation of monopolies, which today is a common practice.
Sherman Antitrust Act
1890
"every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States ... shall be deemed guilty of a felony."
What it is: The Sherman Antitrust Act, passed in 1890, was the first piece of federal legislation to prohibit trusts. It was named after Sen. John Sherman of Ohio. The act was passed by the senate with a vote of 51-1 and the House unanimously with a vote of 242-0. It was signed into law by President Harrison on July 2. The act was in response to growing public concern regarding the power of monopolies, which had the ability to fix prices and essentially control the market without any government intervention.
What it does: The Sherman Antitrust Act can be summarized in two points:
Any person/company found in violation of the act is subject to fines and/or imprisonment, as well as the dissolution of the company (if applicable).
E.C. Knight Case (1895): E.C. Knight Sugar Refining Company was prosecuted in Supreme Court under the Sherman Antitrust Act in 1895. E.C. Knight had just bought four other sugar refining companies so that it controlled 98% of the sugar refining industry. The court, under Chief Justice Melville Fuller, found E.C. Knight not guilty. Its reasoning was that the Sherman Antitrust Act specifically referenced monopolies of "trade or commerce among the several States"; E.C. Knight had a monopoly over manufacturing, not commerce, and therefore the monopoly was legal under the Sherman Antitrust Act. This finding essentially rendered the act toothless, as it could no longer be used to dissolve any monopolies that did not relate directly to commerce.
Use as a Strike-Breaking Tool (Pullman Strike, 1984): During the Pullman Labour-Union Strike, federal injunctions were issued against the leaders of the American Railway Union, stating that the strike interfered with interstate commerce and was therefore illegal under the Sherman Antitrust Act.This established the Sherman Antitrust Act as a strike-breaking tool.
Effects: Because of the findings of the E.C. Knight case, combined with the substantial impact of monopolies on the government, the Sherman Antitrust Act was largely ineffectual in the 19th century. However, due to President Roosevelt's extraordinary efforts to break trusts, the law met more success beginning with his presidency. In 1904 Roosevelt invoked the law to successfully prosecute and dissolve the Northern Securities Company. Other significant victories came under President Taft in 1911 when he dissolved Rockefeller's Standard Oil and the American Tobacco Company. In 1914 President Wilson passed the Clayton Antitrust Act, which essentially replaced the Sherman Act as a stronger, more effectual piece of antitrust legislation. Although other pieces of antitrust legislation have largely replaced the Sherman Act, the importance of the Sherman Act cannot be overlooked, as it paved the way for other antitrust legislation and introduced the idea of government regulation of monopolies, which today is a common practice.